How Important Is a 401k?
Setting up a 401(k) plan for your small business is one of the smartest moves you can make - both for you and your team. Not only does it help everyone build that nest egg for a comfortable retirement, but it's also a fantastic way to attract and keep top talent in today's competitive job market. Plus, there are some great tax benefits for your business, including deductions for your contributions and potential tax credits for starting the plan. Think of it as investing in your team's future while making your business more attractive to potential hires. It's a win-win that shows your employees you're looking out for their long-term well-being.
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Very! A 401k plan has become an increasingly sought after benefit among workers. Plan sponsorship turns out to be good for business too: sponsoring a 401k plan helps even small businesses attract talented employees, and fosters retention and loyalty. Offering a 401k can also provide significant tax advantages and contribute to the financial stability and security of business owners.
Among The Top Three Benefits…
A recent employee survey from ADP’s TotalSource Benefits illustrates how employees are currently prioritizing employer-sponsored benefits and underscores the increasing importance of 401k plans: “In 2024, 62% of employees ranked 401(k) plans as one of their top three benefits, a significant jump from 30% in 2018.”Reporting on the ADP survey for 401k Specialist Magazine, Muhammad Fahmy notes that while employees continue to prioritize compensation above all other benefits, it’s wise for employers to carefully consider employee values and “create a compelling compensation package.” Key takeaways about employer sponsored benefits, based on the ADP survey, include:
For the first time in the survey’s history, 401(k) plans tied with dental insurance as the second most important benefit. This trend highlights the growing focus on financial wellness and retirement planning. Employers can capitalize on this by offering robust retirement savings plans…. Additionally, there is a notable gender gap, with 59% of women respondents rating 401(k)s as important compared to 66% of men, indicating a need for tailored communication and education around retirement benefits.
Over three-quarters (78%) of employees feel valued due to medical benefits provided by their employer, and 82% feel valued due to non-medical benefits like 401(k) plans, flexible work arrangements, and life insurance. Employers must provide a mix of salary and benefits ….The right benefits package can significantly impact an employee’s decision to accept a job offer or remain with their current employer, making it a key factor in workforce stability.
Unique Situations, Personalized Benefits
As employees juggle expenses and responsibilities related to health insurance, housing and household budgets, flexibility and choice making related to the benefit packages offered by an employer also tops wish lists. Based on ADP survey data, 401k Specialist Magazine observes:
Employees increasingly desire flexible, personalized benefits that address their unique situations. The survey found that 75% of employees expressed interest in receiving personalized recommendations for benefits. Despite feeling valued by their employers due to medical and non-medical benefits, voluntary benefits are underutilized. Employers can maximize the value of their offerings by prioritizing benefits that fit employees’ actual needs, fostering a more satisfied and engaged workforce. Additionally, the importance of mental health benefits varies by generation and gender, with Gen Z and women placing higher value on these benefits, highlighting the need for diverse and inclusive benefit options.
It’s not surprising that financial stressors follow employees to work, and as Voya Investment Management underscores, money problems affect the whole business, making it worthwhile to provide financial wellness programming in tandem with the 401k:
Our research shows that money problems account for 59% of employees’ stress in the workplace, which can affect their mental and physical well-being and their performance at work.
Financial stress can cause a delayed retirement. Over half of the financially stressed employees, we surveyed plan to postpone their retirement—at an average cost to an employer of $51,000 per employee. Delayed retirement can also mean delayed career trajectories for newer workers.
Financial wellness programs help with employee retention. According to our research, workers generally view their employers as a trusted source. That creates an opportunity for sponsors to retain employees by offering support in key areas, including improving overall financial wellness and retirement income planning.
Closely related to including financial literacy in learning opportunities at work, is improving cybersecurity practices, especially related to retirement plan access, given the risks to hard earned savings. The Plan Sponsor Council of America has found that half of survey respondents are indeed implementing cybersecurity awareness campaigns and increasing related communications to employees.